CONFIDENTIAL
IV
Possible Action to Mitigate Damage to Hong Kong Trade
18. Hong Kong industry is sufficiently competitive to be able
to face adverse tariff movements against her.
Alternatively
she might well be able to cope with duty-free entry limited
by negotiated quotas in some fields, since she has
considerable skill in such negotiations.
It is a combina-
tion of tariffs with preferences against her and quotas
which could produce an intolerable situation.
a.
The Common External Tariff
19. There is no hope of negotiating association for Hong Kong
and she will certainly have to face the Common External
Tariff, like any developed third country. This is
acceptable; at we should have done well for Hong Kong if
we could stop the restrictions against her trade at that
point, and we would expect the Hong Kong authorities to be
reasonably satisfied with such a result.
20. The Dutch have recently mentioned the possibility of Hong
Kong retaining the right of duty-free entry with the United
Kingdom alone, on the lines of the Morocco Protocol, This
would be bound to be at the expense of free circuletion of
Hong Kong goods in the enlarged Community, and the
continued concentration of imports on the UK would not be
welcome to certain sections of British industry, though it
would benefit the consumer. There is no evidence that this
idea would be welcome generally in the Six.
If it were, we
should have to consider where the balance of advantage lay.
But it seems likely that we would prefer to give Hong Kong
the same tariff treatment as the rest of the Community do,
if we can keep her trade reasonably free of quota
restrictions.
/b.